The Hong Kong stablecoin market heats up, with cautious regulatory responses

As the date approaches for the official implementation of Hong Kong's "Stablecoin Regulation" on August 1, the topic of stablecoins has once again become the focus of the market. Compared to the significant reactions triggered by the U.S. stablecoin bill, the influence of Hong Kong stablecoins in the crypto space is relatively limited, yet they have shown remarkable appeal in the stock market.

Since the passage of the stablecoin draft in Hong Kong, the Hong Kong stock market's stablecoin sector has experienced significant growth. Many related stocks have doubled or even increased tenfold, and investors have responded enthusiastically, while listed companies have seized the opportunity to raise capital and expand their shares. However, in the face of such a heated market atmosphere, Hong Kong regulatory agencies have begun to show some concerns. Recently, the president of the Hong Kong Monetary Authority published an article on the official website, attempting to cool down the fervent stablecoin market.

Although the specific content of Hong Kong's stablecoin regulations, such as licensing systems, full reserves, and paid-in capital requirements, is largely similar to legislation in other regions, the market response has been markedly different. The cryptocurrency market holds a relatively pessimistic view on the prospects of Hong Kong's stablecoin, believing that even if Hong Kong continues to improve its regulatory framework, it will ultimately struggle to break the dominance of the US dollar stablecoin under limited market demand.

However, in the traditional financial sector, this news is seen as a significant positive development. Large enterprises are actively positioning themselves, and traditional media and brokerages are competing to report on it, allowing the topic of stablecoins to truly break through the cryptocurrency circle. Discussions about the essence, application scenarios, and value significance of stablecoins continue to heat up, even extending to the debate on the necessity of a renminbi stablecoin.

Just before the regulation takes effect, the president of the Hong Kong Monetary Authority pointed out that stablecoins are facing risks of over-conceptualization and bubble formation. He stated that initially only a few stablecoin licenses will be approved and urged investors to remain calm and think independently while digesting positive market news. At the same time, the Monetary Authority will seek market opinions on regulatory and anti-money laundering guidelines, especially to establish stricter requirements in anti-money laundering to reduce the risk of stablecoins being used as tools for money laundering.

The Hong Kong stock market's enthusiasm for concepts related to stablecoins has reached an astonishing level. Several companies have seen their stock prices soar simply by announcing business plans related to stablecoins. Not only have newly joined institutions benefited, but existing related concept stocks have also generally risen significantly. This wave of enthusiasm has even impacted the A-share market, where several digital renminbi concept stocks have also experienced significant increases.

Against this backdrop, various enterprises have expressed their intention to apply for a Hong Kong stablecoin license. According to reports, around fifty to sixty companies have shown interest in applying, including mainland Chinese state-owned enterprises, financial institutions, and internet giants. However, the Hong Kong Monetary Authority has stated that most of the applying institutions are still at the conceptual stage, lacking practical application scenarios or the technological and risk management capabilities to issue stablecoins.

In order to respond to the overheated application trend, the Monetary Authority may adopt a preliminary screening mechanism similar to an invitation system. Only institutions that have gained basic recognition in preliminary communications will receive formal application forms. In addition, institutions that previously participated in the stablecoin sandbox testing may have a slight advantage in the application process.

Overall, Hong Kong mainly focuses on three aspects when evaluating stablecoin license applications: technical implementation capability, application scenario requirements, and risk control capability. This means that large enterprises, especially those with rich experience in cross-border finance and payment services, may find it easier to obtain approval.

Despite calls from regulators for the market to cool down, the short-term surge of stablecoins may be difficult to fade quickly. The development trend of the US stablecoin market, the heated discussions surrounding offshore RMB stablecoins, and the potential business opportunities brought by stablecoins will continue to drive the ongoing warming of this topic.

However, investors need to approach this frenzy with caution. Although licenses are an important part of the compliance race, the actual impact and business viability of these licenses remain to be verified. Considering the high application costs and ongoing compliance fees, businesses without strong business models may find it difficult to benefit from this. As regulators have stated, the companies that can truly sustain themselves in the long run may be just a few, while many others that merely follow the trends may struggle to maintain high valuations over the long term.